Neil Heywood, the French frontman and the Chinese hot air balloon deal

The death of Neil Heywood has come under fresh scutiny as new details can be
disclosed about the business dealings of the Chinese woman accused of his
murder - including a bizarre deal she struck to import hot air balloons from
Dorset to China.

Image 1 of 2

Neil Heywood was initially said to have died from alcohol poisoning in a hotel room, before being cremated without an autopsyPhoto: REUTERS

Image 1 of 2

The Observation balloon in Xinghai Square in city of Dalian, ChinaPhoto: Jay Williams

One of the people involved in the deal claims she wanted to use it to fund the prep school fees of her son, Guagua, a “princeling” who is now a student at Harvard University, and whose lifestyle has been highlighted as evidence of his parents’ corruption.

The deal casts new light on Mrs Gu, her life in Britain, and how she transformed herself from scion of a Communist dynasty to a businesswoman of extraordinary wealth.

Her rise has been accompanied by a fall every bit as spectacular. She is now being held by the Chinese authorities, while the whereabouts of her once-powerful husband, who was removed from the Politburo, are not known.

Their disappearance coincides with the 10-yearly renewal of the Chinese communist party’s leadership amid speculation that Mr Heywood’s untimely death may have been used by Mr Bo’s enemies to purge him from the ruling elite.

Mr Heywood, educated at Harrow, was found dead in his hotel room in Chonqing in November last year. The authorities initially said he had died of alcohol poisoning, while his family were told he had suffered a heart attack.

Mr Heywood had acted as an adviser and fixer to Mr Bo and his wife, and was said to have helped their son achieve a place at Harrow.

The death remains a mystery, and British police may now be ordered to open their own investigation.

Dr Andrew Harris, a London coroner, is considering using special powers to request that Kenneth Clarke, the Justice Secretary, gives him authority to hold an inquest into Mr Heywood’s death. That would pave the way for Scotland Yard to be called in and British diplomats to ask Chinese police for their notes.

The downfall of Mrs Gu comes more than a decade after the hot air balloon deal, when Mrs Gu was embarking on her own business venture while her husband was creating a political power base in China.

Quite why she should have been interested in bringing hot air balloons from Dorset to China is not clear but one person involved in the deal, worth £600,000, told The Sunday Telegraph he believed that she attempted to use the contract to move cash out of China secretly.

Incredibly, that included an extra £200,000 to pay for her son’s long-term education at British public schools — an allegation that chimes with claims in China that Mrs Gu enriched herself by laundering the gains of corruption in her home city by moving it overseas.

The discussions over the balloons began in 1998 when Mrs Gu, now 53, was living in a penthouse flat in central Bournemouth while her son, Bo Guagua studied English at a college in the town before transferring to Papplewick prep school, near Ascot, and a place at Harrow. Mr Guagua, now 24, said last week that his education was funded through scholarships and family savings.

The balloon deal began rather informally, when Mrs Gu approached Giles Hall, whose firm, Vistarama Balloon Systems, ran the “Bournemouth Eye” at the time. The “eye”, a tethered balloon, offered views from 500ft above the resort. A similar attraction is now run by another firm.

“She could see our balloon in Bournemouth’s lower gardens from her apartment and she came and introduced herself,” said Mr Hall. “She was dripping with expensive jewellery and told us she was from China and her husband ran the city of Dalian and that she thought it would be a wonderful thing for the city to have a similar balloon.”

Mrs Gu was telling the truth about her husband — at the time, Mr Bo was mayor of Dalian. But there was one thing she was not truthful about: her name. For months, Mr Hall and the other Britons involved thought she was called Horus Kai.

It was the name she used for her business deals in the US and Britain for more than 20 years — an apparent reference to Horus, the name of the ancient Egyptian god of the sky, war and hunting.

Mrs Gu ran a company called the Law Office of Horus L Kai, which had offices in Beijing and Shanghai, as well as Dalian, and held a stake in Horas Consultancy and Investment, which was registered under a slightly different spelling. She advised clients who wished to do business in China as the country’s economy boomed in the 1990s.

Mrs Gu was accompanied in Bournemouth by Patrick Henri Devillers, a French architect, who she said was her “middleman”. Vistarama was a small company and its staff found themselves thrust into negotiations with people who promised contracts worth millions. Mr Hall said: “At first the talk was of supplying one balloon for Dalian but quickly we were being told that if things went well there would be hundreds more orders for other parts of China.

“Gu introduced us to Patrick Devillers. He was her frontman. He signed the contracts.

“I also met Neil Heywood. I think his involvement was meant to reassure us. He was an Englishman who knew how to work in China.

“When we met him without Gu he even offered to work for us as our fixer. He said it was important to have someone working on your behalf, but I was intrigued about how someone so young was involved with Gu and her husband. He was only in his late 20s or early 30s at the time.

“He told us he had gone to Dalian as it had a free trade area and had introduced himself at the municipal offices and had met Bo Xilai there. He was very self-confident. He came across as very much the public school boy, very well spoken, and very smooth.”

The deal took Mr Hall and his colleagues to China, and eventually, “Miss Kai’s” identity emerged. “For months we knew her as Horus,” Mr Hall said.

“It was only later that we found out who she really was and how powerful her husband was. My team had meetings with Bo Xilai in China and other provincial governors, but there was no doubt who was in charge.”

The meetings led to a deal, with the Chinese paying for a balloon that would offer views over Dalian. It was supplied by Lindstrand Balloons, owned by Per Lindstrand, the Swedish aeronautical engineer known for his ballooning record attempts alongside Richard Branson, the Virgin boss.

When the deal was struck, Xu Ming, the head of the Dalian Shide Group and China’s fifth richest man, came to Bournemouth, and took a ride with Mrs Gu and Mr Devillers.

“I remember that Xu Ming was reluctant to come to Britain,” Mr Hall said. “We were told they were to sponsor the balloon, which was designed to look like a giant football, as Xu Ming was chairman of the Dalian Shide football club.”

A British engineer for the company went to Dalian to install the balloon, where he met Mr Bo. He was the couple’s guest at a visit to the theatre, where the audience stood to show their appreciation for his work on the balloon – in itself a subtle indication of Mr Bo and Mrs Gu’s extraordinary power.

The engineer, who wants to remain anonymous, was charmed by Mrs Gu and says that it is impossible to reconcile the woman he knew with the picture of a businesswoman at the centre of an empire of deceit, international money-laundering and murder being painted by Chinese officials. “Gu was always kind, gentle and generous. She cooked me Chinese meals in her flat in Bournemouth and took me out on several occasions in London and in China,” he said.

“The picture being painted of her now does not in any way seem to be about the same person I knew and I simply cannot believe that she did the things she is accused of. To me she seemed like a woman whose only goal was to do things for the benefit of China and its people, not for her own personal gain.”

He never met Mr Heywood but saw Gu with Mr Devillers on several occasions. “I don’t want to say too much,” he said. “They seemed very close.”

As the deal progressed, however, Mr Hall became suspicious. Money was coming from more than one account — including Mrs Gu’s personal account, which he recalls as being at Coutts — and then an extraordinary suggestion was made.

“We were arranging to supply a giant winch which is used to tether the balloon to the ground and then to control its assent and descent,” said Mr Hall.

“The cost of the winch, which was second hand, was about £100,000 but Gu suggested she would give us a lot more. She wanted to give us an extra £200,000 which she said she needed in Britain to pay for her son’s school fees. We were taken aback. We didn’t want to get involved in something like that.

“When we refused she got angry. She changed from someone very friendly and gentle to someone who clearly didn’t like not getting her own way.”

The deal hit further problems when, after delays in payment, the winch failed to be loaded on to a container ship bound for Dalian and instead was flown to Beijing, where the tax authorities started to take an interest.

“She called,” said Mr Hall. “Gu accused me of not taking her seriously. She warned me that I should never come to China. If I did, she said, I would be arrested and thrown in jail.”

The deal ended in recrimination, and Mr Hall’s company was wound up, although some who were involved with him — including the engineer who installed the winch — suggest that he was largely to blame, not Mrs Gu and the Chinese.

The fate of the balloon itself seems apt given Mrs Gu’s fall: it remained in the city for two years until a hurricane blew it away and it was destroyed. A replacement balloon, supplied directly by Lindstrand Balloons without the involvement of Mr Hall’s company, was purchased by Shide Group, but it, too, was destroyed after it was hit by fireworks during a celebration in the city.

Mr Bo and Mrs Gu left Dalian afterwards and rose to power in Chongqing. But Mr Heywood and Mr Devillers remained significant figures in their dealings.

Mr Devillers went on to set up a “law firm” in Bournemouth three years after the balloon deal — although there is no evidence that it traded — and later lived in a £1.3 million apartment in Earls Court, west London.

The nature of Mr Heywood’s relationship with Mrs Gu has been the subject of wide speculation. Mr Hall said: “He was a ladies man, of that I have no doubt, but I don’t think he was with Gu in that sense.”

Meanwhile, Mr Devillers’s family in a small village in eastern France say they have not seen him, although they say they remain in touch by telephone. It is said that he has not been seen in Beijing and Shanghai, where he is known to have done business, for two years.

However, the first confirmation that he is following developments in the extraordinary case came yesterday, when Stephane Biver, a lawyer acting for Mr Devillers’s property company based in Luxembourg, said he would not comment. She said: “Your request was passed on to Mr Devillers, who advised us that he doesn’t want to comment on this case.”

In China, the other parties remain at the heart of the case:

Mr Xu, who is suspected of “economic crimes”, is presumed to be in custody, as is Mrs Gu. She may now need some of the charm and fortitude her British business partners noted.

The engineer who worked with her noted: “Mrs Gu was always understanding, never cross and never blaming anybody. She was so easy to work with and I admired her calm attitude to disappointments.”

* Additional reporting from David Eimer in Beijing and Josie Ensor in London